CEO Marissa Mayer denied rumors over the weekend that with Yahoo stock down 38 percent over the last twelve months, she was about to leave the company.
Silicon Valley stocks suffered their worst drop last week in 3 months. A year ago, stocks were soaring with tech IPOs spiking to incredible profits on their first day of trading.
But the bubble has burst with five of the twelve U.S.-based tech companies that went public this year pricing their shares at valuations below private market values. OnDeck saw its valuation fall 52 percent from $1.3 billion before its IPO to about $624 million, according to Reuters.
The shifting investment climate comes as some of Silicon Valley “unicorn” tech start-ups with private market valuations of over $1 billion have recently pulled their plans to go public. Examples include data storage company Nutanix and online lender Prosper Marketplace.
Premier unicorn Square Inc. (preliminary: SQ-NYSE) payments rattled Silicon Valley’s pixie dust machine two weeks ago when the company filed public disclosure documents with the Securities & Exchange Commission before starting their IPO roadshow.
Despite the San Francisco e-commerce start-up raising $100 million a year ago in September in a late stage round of venture capital funding at a $6 billion valuation, the SEC docs reveal Square booked a net loss of $131.5 million on $892.8 million in revenue in the first three quarters of this year. Over half of Square’s revenues are being eaten up paying for transaction costs to run on other firms’ payment networks.
With Square’s discounted valuation and push to start trading just before the Thanksgiving holiday in late November, analysts suggest that the company needs cash and expects the public market will be more receptive to funding further losses than its private market investors.
The speculation about Mayer leaving Yahoo seems to be tied to a Re/code blog report last week that Yahoo had hired an outside consultant to help her with another restructuring of Yahoo’s core business, including which units to close.
SunTrust analyst Robert Peck argues that it is time for Mayer to leave. He complains that after spending $7 billion on a combination of mergers, acquisitions, and higher research and development since she joined the company in 2012, Yahoo’s earnings before interest, taxes, depreciation, and amortization have actually declined by -45 percent.
But Kara Swisher at Re/code pointed out that Mayer recently required all her top Yahoo executives to solemnly promise that they will stick with the company for another three to five years. Swisher believes Mayer would be pummeled if she voluntarily bails out of Yahoo for another opportunity.